A report into a Henderson preschool has found that despite its founder being convicted of fraud she allegedly carried on running the facility, misappropriating funds to spend at casinos and stacking its board and staff with friends and family members.

In 2008 Siaifoi Lisa Palmer founded the registered charity Ranui Boys Incorporated, operating as the Samoan-language Youngstars Preschool and Childcare Centre, on Longburn Rd.

After an Internal Affairs investigation, the charity was deregistered in August 2015 - the strongest sanction available to the Charities Service - with the report saying evidence of theft and forgery by Palmer would be referred to police.

The investigation report into Ranui Boys was obtained under the Official Information Act by the Herald as part of its Opening the Charity Box series looking at the health of New Zealand's $53 billion charitable sector.

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Palmer had been convicted in June 2012 on three representative counts of fraud after complaints from the Ministry of Education she had inflated attendance figures to secure more funding for Ranui Boys.

After that dishonesty conviction - legally disqualifying her from running a charity - the Teachers' Disciplinary Tribunal also banned her from being involved in managing schools for five years.

The Herald on Sunday has been unable to contact Palmer, and requests for comment or contact details sent to family members have gone unanswered. A former administrator of the preschool said he had not seen her for two years and understood she now lived in Samoa.

Charities Service investigators probing complaints of her continued management, despite her disqualification, drew a response from Palmer in the form of a letter addressing her 2012 conviction.

"She was very apologetic in the letter and detailed how work with 'our Senior Pastor' concentrating on the 8th commandment 'Thou shall not steal' amongst other guidance had helped her," the report said.

The investigation report found Palmer had carried on running the school despite her conviction and ban, with signatories on the society's bank account being herself, her partner Luamanuvae Samuelu and her daughter.

Investigators uncovered evidence that Palmer had allegedly directed charitable funds to prop up her mother's motel in Samoa, and also for personal use at SkyCity.

The reports said records from SkyCity "show Palmer has frequented the facility and actively gambled, using money withdrawn from a personal accounts, which was boosted by the frequent and unregulated transfer of Society funds".

Nepotism was also discovered, with investigators concluding: "The current Society appears to be mismanaged and lacks governance. The original charitable purposes seem to have been eroded and all the indications are that Palmer has created an entity that creates employment for her family and friends and allows them to benefit from free childcare."

A number of staff at the society were found to be unqualified, or banned from teaching, or even not in New Zealand at the time of their apparent employment.

The findings against Palmer were identified as "examples of the serious wrongdoing and the gross mismanagement which has corrupted the Society".

A police spokeswoman said an investigation was carried out into the allegations raised in the report, and it concluded with no charges laid.

"There is no criminal prosecution in relation to this matter due to insufficient evidence and a failure to meet Crown prosecution guidelines for evidential sufficiency," the spokeswoman said.

In July last year the Teachers' Disciplinary Tribunal concluded Palmer's failure to adhere to their earlier ban on her involvement in school management amounted to serious misconduct and cancelled her registration.

Questioned about Palmer's flouting of their earlier order, a spokesman for the Education Council said: "In this case, the teacher indicated she was complying, although the reality was she was knowledgeably in breach of her conduct conditions."