When the chairman of a $24 million community investment trust died this year, people in the area suddenly realised they'd lost control of a great idea designed to protect their money.

The death of Ian Elliot, described as a tireless worker for the betterment of South Waikato, was a shock to the community.

The dairying and kiwifruit businessman had been chairman of the South Waikato Investment Fund Trust (SWIFT) since it was formed by the South Waikato District Council (SWDC) in 2014.

His death threw the spotlight on SWIFT, the economic development funder the council had created to ring-fence some $20m in proceeds from the council's sale of community electricity shares years before.
With the threat of local body amalgamation brewing, the idea to protect the nest egg was lauded as bold and innovative.


The new attention on the trust revealed two trustees were now sharing the chairman's job and someone in the business community discovered the trust deed had been changed in 2016.

Most changes were immaterial but alarmingly, trustees had axed what was known as the "appointment panel".

The council learnt of the deed change after it was done. Technically, the trust didn't need the council's permission first (see sidebar).

But the action severed the only formal influence the council had on the trust, as a voice on the panel nominating trustees.

Next, someone realised South Waikato people had never been offered annual reports by the trust. And nothing in the new trust deed made them think that was going to change.

SWIFT's website doesn't offer annual reports, and nor does its listing on the Companies Office trust register.

Again, the trust wasn't breaking any rules, though it seems to have missed the memo about transparency being a measure of good governance.

The Companies Office confirms that trust boards registered under the 1957 Charitable Trusts Act, like SWIFT, are not required to file financial statements.

Worried that SWIFT had become a law unto itself and getting zero response to their concerns from trustees, some locals contacted the Herald.

When approached, trust co-chair David Graham, a retired accountant, farmer and former chairman of Ballance Agri-Nutrients, wanted to know who had complained. Told that was confidential, he said in that case he might not answer the Herald's questions.

SWDC chief executive Ben Smit. Photo / Supplied
SWDC chief executive Ben Smit. Photo / Supplied

He agreed to receive written questions. It took Swift almost seven days to provide answers, which came as a "joint response" with SWDC chief executive Ben Smit. The trust's other co-chairman is dairy farmer Philip White.

The Herald is still waiting for a copy of the latest SWIFT annual report.

Smit has been in the job for about six months. He was deputy chief executive in 2014 and oversaw the creation of SWIFT, with legal and other outside advice.

It appears that he may also have also been nursing some concerns about SWIFT's governance and accountability.

When approached, he said he and South Waikato mayor Jenny Shattock had scheduled a formal meeting with the trustees this week because of "feedback" about concerns. The pair had attended a trust board meeting late last year, just after Smit was appointed chief executive.

Before then, meetings between council leaders and SWIFT had been "informal", Smit said.

But the council and SWIFT economic development working teams had met regularly, he said.

Smit said "I got told afterwards" that the trust deed had been changed. He said his reaction to that news was his "personal feelings" and would not comment further.

The council had received annual reports containing SWIFT financial statements every year since 2014, he said.

Smit said he wanted to know "how they will change their profile to make sure there is strong accountability, and strong information for the community."

South Waikato mayor Jenny Shattock. Photo / Supplied
South Waikato mayor Jenny Shattock. Photo / Supplied

Mayor Shattock, who was on the discarded appointments panel in its early days, said she was "surprised" to learn trustees had changed the trust deed.

She agreed the move shut out the council's voice. Asked if she wanted the panel reinstated, she said she thought the council could have a say "anyway on an informal basis."

She'd like to see a council nominee on the trust. "The board is looking for new trustees and have asked us for suggestions. I'm quite comfortable at this stage with the relationship we've got with the trust."

According to the joint SWIFT-council written response, last Monday's formal meeting produced a hope for more transparency. SWIFT's financial statements would be available on its new website "shortly."

Its year-end December 2018 financial statements should be "audited and available in a few weeks".

Asked when a new chairperson would be appointed, and if new blood would be invited onto the trust, SWIFT said "working toward a process in October 2019."

The trust deed, said the response, had been changed because of a "cumbersome" situation before 2016 which involved two trusts – one to manage the investment fund (SWIFT) and another called Drive, which provided economic development support.

"Both SWDC and the trusts recognised this was cumbersome and the trusts agreed to amalgamate in the interest of efficiency and to reduce costs of managing two trusts.

SWIFT set up an investment and risk committee to adopt the role of guardian to the core fund. Swift sought legal and specialist advice through the process and this change was on the basis of this recommendation."

The appointments panel was dropped because it was also "cumbersome" and expensive to administer.
According to Companies Office records, SWIFT's accountants are Graham Brown and Co of Putaruru, a firm founded by SWIFT co-chair Graham.

Asked if this is appropriate, SWIFT responded that Graham is retired from the firm, no longer a partner, and "therefore has no financial interest".

Trustee appointment dates, missing from the website, will be reported in the next annual report.
Meanwhile, Herald inquiries reveal:

■SWIFT's total cash assets as at December 31 were $24,879,333.

■It provided figures only for 2018 and 2017, on how much SWIFT had paid in grants since its establishment.

■"[In] 2018 $118k was spent plus commitments of $284k. [In] 2017 $253k. For 2018 there has also been approximately another $1.3 million of strategic property acquisition to help facilitate development in the district."

■SWIFT's investment manager is JB Were.

Asked how many economic development funding applications were received last financial year, the response was "very few".

"That is, it has not been the most successful mechanism as SWIFT is not like the Lotteries Commission where you just apply for a grant. While SWIFT has the scope to do that, our goals are to facilitate and collaborate to make maximum impact to our community.

As such, many of our opportunities are driven by making contact with external opportunities/local business networks and groups, or through the work of our ED [economic development] manager co-ordinating and collaborating with council."

Why SWIFT has been allowed to have its head

In 1994, SWDC received shares from local electricity company Power Co as part of major electricity sector reforms. The council sold most in 1998 for $21.6m and created the South Waikato Investment Fund to hold the money and fund economic development.
Surplus earnings were used to subsidise general rates.

In 2014, after annual plan respondents pushed for an independent entity to safeguard the money in case of local body amalgamation, the council formed the trust SWIFT.

Legal advice was that it must be a completely standalone, independent entity if the fund was not to become part of the money pot in an anticipated amalgamation.

As a result, no reporting or accountability obligations were imposed on the trust. The Auditor-General and Parliament passed the ruler over the trust's formation, which was lauded as a bold and innovative move.

Council chief executive Ben Smit said SWIFT's original $20m fund wasn't really ratepayer money. It was from "historical electricity users". But then he went on to say "a large number would have been ratepayers".

He rejects the suggestion the council handed over $20m, then lost track of it.

"No, the objectives and purposes were very clear, and they've stuck to those purposes.

On the operational side [the connection] is relatively strong. But there is room for development around the governance relationship. It is improving at the moment."