The Dunedin gang members who sourced Whanau Ora grants to buy cannabis "conspired to financially rort their own organisation and, by implication, those that funded them", Whanau Ora Minister Tariana Turia says.
The Minister was responding to documents released to the Otago Daily Times under the Official Information Act concerning the We Against Violence Trust.
Mrs Turia said she knew how hard it was to build community support around initiatives involving gangs.
"You might appreciate that working with gang affiliates and their families is very challenging.
"Not because the families don't want to make positive changes for themselves, or aren't prepared to put the effort in, but because this work is always one step away from a media and public outcry."
The recent convictions of four key men involved in the Dunedin-based trust did "little to lessen my disappointment but they have been held properly to account for their illegal activities and gross breach of trust".
The police investigation into the We Against Violence Trust showed the trustees "conspired to financially rort their own organisation and, by implication, those that funded them", she said.
That decision also affected the community groups who supported them and, "worst of all, the families who put their faith in them".
Te Puni Kokiri (TPK) carried out its own investigation and review of the trust's contract arrangements in May 2012, which included meeting the families with which the trust claimed to be working.
Documents reveal the trust made a funding application to deliver whanau planning resources for nine whanau, and this was subjected to a full range of checks, including letters of support.
The September 2011 contract was for $45,000 and involved two payments: an initial payment of $36,000 and the remainder for the final report and completed plans.
A December 12, 2011 report said the trust was making good progress and a final report concluded outcomes were being achieved, so the final contract payment was made on April 3, 2012.
"TPK believes that it has received value for money for the $45,000 contract," a report noted.
Days after police confirmed the name of the trust - and the ODT reporting its links to Whanau Ora - a briefing was sent to the Minister noting the contract had been reviewed the week before and TPK was satisfied it was "appropriately delivered".
A more detailed review was then commissioned, which included fieldwork in Dunedin and interviews with unnamed people in connection with the case.
A subsequent review in July detailed how the misappropriation took place, including meetings not actually held and reports being falsified. Invoices, receipts, trust notes and other reports were false.
"In addition, police, having also contacted family members of the whanau, the subject of the contract, were able to establish that in some cases no meeting had been held, contrary to the reports received by TPK."
That report concluded that there was nothing TPK "should have been aware that something was amiss or should have raised concerns".
However, it recommended "proactive monitoring of high-risk investments", as the Dunedin case was given a thorough review only after widespread media publicity.
Earlier TPK documents showed the We Against Violence Trust was an organised umbrella group of 320 individual whanau members living in Dunedin.
The $45,000 contract included $24,000 paid to facilitators for preparing nine whanau plans.
In addition, $12,000 was budgeted for hui costs and whanau plans, while report writing and completion of plans was allocated $45,000.
Money to be allocated as part of those whanau plans included for a season pass to watch the Highlanders and the purchase of bagpipes.
While the trust's application was assessed as being "low risk", TPK did raise concerns that the trust had "no evidence showing financial capabilities".
"TPK will work with this organisation to develop some processes toward accountability should this project be approved."
Since 2010, TPK had let more than 800 Whanau Ora funding contracts with community based-groups, with almost all those contracts successfully completed, Mrs Turia said.
More than 33,000 people from more than 3000 family and whanau groups had been supported via Whanau Ora funding and facilitation to develop collective goals and action plans, she said.
"This is almost the equivalent of delivering positive, and potentially transformative, support to every resident in Oamaru, Mosgiel and Gore combined," she said.
Mrs Turia said she was immensely proud of Whanau Ora and was focused on broadening the support base for whanau-centred services and investment.
"And strengthening community leadership of Whanau Ora in ways inclusive or our most marginalised and vulnerable groups."